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Tuesday, 10 April, 2001, 14:05 GMT 15:05 UK
Q&A: Are farmers victims of Tesco?

Tesco has made pre-tax profits of 1.07bn at a time when UK farm incomes are about one third their level of six years ago.

Is Tesco reaping undue rewards from struggling farmers?

Is anyone upset by the bumper profits?

The National Farmers Union said that profits would be hard to understand for many of its members, who have been devastated by the foot-and-mouth crisis.

The National Consumer Protection Council warned Tesco that country dwellers would find such profits "hard" to comprehend.

Liberal Democrat MP Lembit Opik, meanwhile, has demanded the formation of a regulator to "ensure a fairer deal" for suppliers such as farmers.

"What is galling is that farm gate prices have gone down. Someone, somewhere is making a lot of money out of farmers."

Will the government listen?

Cast your mind back to the early months of the current administration and you may remember a campaign against "rip-off Britain".

Supermarkets were one of the areas where the price of goods were more expensive in the UK than abroad.

But while the government has claimed some success in, for example, prompting cuts in the prices of new cars, efforts to tackle food retailers have been less clearcut.

Fair trade watchdogs in 1999 referred supermarkets for investigation by the Competition Commission.

In October, the commission found that, really, retail giants had little to answer for. Tesco itself says that prices are 11% lower in real terms in the past five years.

The commission found the industry was "broadly competitive" and "overall, excessive prices are not being charged, nor excessive profits earned".

So 1bn does not count as "excessive"?

Not, if you take a more detailed look at where the money is coming from, Tesco says.

The group's 12% profits increase was almost exactly in line with the rise in sales, indicating that it had not raised prices.

The firm credited the growth in profits on increased volumes of sales - on its success in selling rather than charging customers more, or indeed paying suppliers less.

So who exactly has been "making a lot of money out of farmers"?

That question seemed to puzzle the Competition Commission too.

But it said that when falls in the costs of farm produce had not been reflected in supermarket prices, the difference had been swallowed up not by retailers but "elsewhere in the supply chain".

The "supply chain" might include businesses such as abattoirs, hauliers or packaging companies.

So what hope is there for UK farmers?

One area where the Competition Commission did find supermarkets, including Tesco, were not behaving as well as they might was in their relationship with farmers.

Suppliers were being unreasonably forced, for example, to underwrite store discounts, or pay to have goods prominently displayed.

The commission has drawn up a code of conduct, which Tesco will implement in October, to protect suppliers.

But as agriculture's largest representative body, the National Farmers' Union, points out, it is also up to farmers to help themselves.

They recommend that growers form alliances, which can benefit from synergies and "collective muscle", when dealing with the likes of Tesco.

"They can prove they can run themselves as well as any supermarket chain," an NFU spokesman told BBC News Online.

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See also:

20 Mar 01 | Business
UK economy to ride out farm crisis
10 Oct 00 | Business
Supermarkets given all clear
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